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UK will not pay lump sum Brexit bill, according to draft agreement

LONDON — The U.K. will pay no upfront Brexit divorce bill to the European Union but will instead continue to act “as if [it] remained a member state” by meeting its ongoing liabilities as and when they arise for decades to come, according to a draft text of a joint agreement with the EU.

The clause forms part of a proposed draft agreement between London and Brussels that was circulated among U.K. officials Monday, the contents of which have been shared with POLITICO. It is a version of the text that was close to being finalized by Prime Minister Theresa May and Commission President Jean-Claude Juncker before Northern Ireland’s Democratic Unionist Party pulled the plug on the deal in a dramatic 11th-hour reversal for the U.K. prime minister.

The details of the document, according to a U.K. official who was given the draft, covers the three phase one issues of money, Northern Ireland and citizens’ rights, which the European Union has stipulated must be sufficiently resolved before the negotiations can move on to the U.K.’s future relationship with the bloc.

The 15-page draft agreement lays out the scope of the U.K.’s financial settlement with Brussels as well as the ongoing influence of the European Court of Justice in U.K. legal matters post Brexit. The commitments contained in the document include an agreement that the U.K. shall:

Meet its share of the cost for projects signed off in the 21 months after Britain leaves until the end of the EU’s 7-year budget which finishes on December 31, 2020 — the so-called reste à liquider;

Have the option of participating in some EU programs post Brexit;

Have “due regard” to ECJ case law on EU citizens’ rights;

Set up an independent national authority to monitor citizens’ rights concerns.

Another U.K. official familiar with the text said that in addition there was an “explicit” reference that the offer is “conditional on an overall agreement which takes into account the framework for a future relationship and an early agreement on transition,” raising the prospect that it could all be withdrawn should the talks break down.

The text went through a number of changes on Monday as officials sought to fine-tune the final document and could yet be altered in the last-minute horse-trading between London, Belfast, Dublin and Brussels as a compromise is negotiated. However, officials believe most of the agreement has been locked in, with Juncker insisting Monday that only “two or three” issues remain outstanding.

“May wants the shortest possible time limit. The EU wants 15 years” — Philippe Lamberts, the president of the Greens in the European Parliament

While the financial settlement was long seen as the most politically toxic, it is the one issue on which agreement has been reached, according to one U.K. official familiar with the state of the talks.

On Northern Ireland, a deal had been agreed to ensure regulatory “alignment” on the island of Ireland until the DUP warned it was unacceptable halfway through May’s crunch lunch meeting with Juncker.

The role of the European Court of Justice in the protection of EU citizens’ rights in the U.K. after Brexit, however, remains unresolved between London and Brussels, although an agreement is close.

According to the draft of the document partially shared with POLITICO, the U.K. has pledged to take “due regard” of ECJ rulings before Brexit day and has agreed a system in which the U.K. can ask for the Luxembourg court’s interpretation in cases — although according to U.K. officials this would not be binding.

According to the draft document, however, the U.K. wanted to insert a sunset clause limiting the ECJ’s role in U.K. legal disputes. The number of years was left blank in the document, indicating that it was the subject of negotiation.

“May wants the shortest possible time limit,” said Philippe Lamberts, the president of the Greens in the European Parliament who was briefed on the draft agreement Monday morning. “The EU wants 15 years.”

Philippe Lamberts in the European Parliament in Strasbourg | Patrick Seeger/EPA

Lamberts was part of a group of MEPs from the Parliament’s Brexit steering group who met with Juncker on Monday before the lunch. The Belgian MEP added that the sunset clause was “one of the issues that remains under discussion.” He said the British offer was “around 10 years.”

In the end, the financial settlement was the easiest of the three issues to solve with the U.K. prime minister agreeing the components of the future bill, the “principles” for calculating the value and how it will be paid.

However, while the broad formula for calculating the final bill is set out in detail over four and a half pages there is no smoking gun figure or percentage of the total EU budget. Those issues have been kicked into phase two of the negotiations.

Here are the details of the draft agreement shared with U.K. officials:

Citizens’ rights

The offer protecting the rights of European Union citizens living in Britain and British citizens living in the EU after Brexit runs to nearly five pages and forms the first section of the agreement.

European Court of Justice

— Sunset clause. The sunset clause limiting the number of years the ECJ retains its proposed advisory role in U.K. law has been left blank to be agreed between now and the European Council on December 14.

— Due regard for ECJ case law. The draft agreement says the U.K. shall have “due regard” to ECJ case law before Brexit day and sets out how the U.K. can ask the ECJ for interpretation of EU law where necessary. But according to one U.K. official, nothing in the document says U.K. courts will be bound by the ECJ’s advice. “Taking guidance from, rather than referring to as the ultimate arbiter,” according to the official.

— Independent authority. The draft proposes a new independent national authority in the U.K. to monitor citizens’ rights cases. It says the European Commission will play a similar role on the EU side, but leaves open a suggestion that the EU should set up a similarly independent body to mirror the U.K. system.

Financial settlement

The section covering the U.K.’s ongoing financial liabilities runs to four and a half pages, broken down into four sections.

1. Components

— EU multi-year budget. As Theresa May set out in her Florence speech in September, the document says that the U.K. will cover its share of the EU’s multi-annual financial framework (MFF) — its budget — which runs up until December 31, 2020.

— Reste à liquider. The second component is the reste à liquider — or outstanding budget commitments for projects which haven’t started or aren’t completed. The U.K. has vowed to honor commitments made during the seven-year MFF budget period until December 31, 2020. Some of these expenses will become due after that date, though.

— Contingent liabilities and corresponding assets. For example, the loans the EU has given to countries like Ukraine which the U.K. has promised to stand behind should they turn bad. A clause has been inserted into this section to protect the U.K. in the event of a future default ensuring that in the event of liabilities being triggered, the U.K. will receive its share of any subsequent recoveries, the draft agreement states.

— Space programs. The EU assets relating to space programs are not part of the financial settlement.

2. Payment methods

The second part of the financial settlement chapter covers the “principles for calculating [the] value of the financial settlement and payment methods.”

— No lump sum. The U.K. and EU have agreed not to settle the debt in one lump sum payment. Payments arising from the financial settlement “will become due as if the UK had remained a member state,” according to the U.K. official, paraphrasing the agreed text. In particular, the U.K. will not be required to “incur expenditures earlier than would be the case had it remained a member state” unless this is agreed by both sides. “We are going to pay the bills as they come up,” explained the U.K. official.

— No final figure. One of the benefits to this approach, according to the U.K. official, is that it is very difficult to work out how many billions the U.K will eventually pay, especially when it comes to pensions which could come 40 years down the line. It also means that the U.K. pays for the actual cost of EU commitments, not the forecast amount. A figure for the total bill, or a percentage of the EU budget the U.K. has agreed to pay, is not in the draft document.

— Future costs. The ongoing cost of funding European Union workers’ pensions ”will be paid when these amounts fall due,” leaving the U.K. on the hook for costs drifting well into the future.

3. Continued participation

Part three of the money chapter covers arrangements for “continued participation” in EU programs. “We may wish to participate in some of the programs post member state,” explained the U.K. official. These are not specified at this stage but could include the Horizon 2020 research program, for example.

4. EU investments

Part four covers other components of the EU like the European Investment Bank, the European Central Bank and European Union Trust Funds. According to the draft agreement, the U.K. will continue to be a party to the European Development Fund until December 31, 2020.

Vishnou

What the UK doesn’t seem to understand is that they want to have their cake and eat it. It is just not possible. And it won’t happen.

Posted on 12/6/17 | 12:39 PM CET

François P

“According to the draft of the document partially shared with POLITICO, the U.K. has pledged to take “due regard” of ECJ rulings before Brexit day and has agreed a system in which the U.K. can ask for the Luxembourg court’s interpretation in cases — although according to U.K. officials this would not be binding.”

Doesn’t sound very constraining for the UK. A relatively elegant compromise in my opinion.

Posted on 12/6/17 | 12:49 PM CET

Gerhard

When will the UK finally understand that they can only lose, if they do not compromise? Stubbornly repeating the slogans of the Brexit campaign doesn’t help at all, to the contrary.

Posted on 12/6/17 | 1:04 PM CET

Lady Snortgiggle the half blood of Transylvania

@Gerhard

When will you ever understand your own repeated soundbites will get you nowhere.

Posted on 12/6/17 | 1:06 PM CET

Georgis Pananopoulis

And Vishnou and Gerhard, when will the EU understand that not everything can be in the EU’s favour?
‘Divorce’ is usually a 50/50 thing but the EU wants everything and that’s what the British can’t understand, do you?
And Vishnou, you can have your cake and eat it particularly when its your cake but of course not if the EU wants to eat it first!

Posted on 12/6/17 | 1:33 PM CET

Blue Stilton

Where did I hear before, ‘no deal is better than a bad deal’. Guess, whilst reading every forum from the DE to the Graun, the UK will be shopping around for a new prime minister before to long. Possibly the smell of a vote of no confidence coming on.

Posted on 12/6/17 | 1:35 PM CET

Jodocus5

Sounds perfectly reasonable.

The UK’s word on meeting future payments as if it still were a member is good enough as it avoids big holes in the EU budget. Perfect.

Giving due regard to ECJ decisions is a compromise, but a good one. I suppose we can live with that.

Everything else can be worked out in due course with a bit of good will, except the question of the Irish border I suppose.

Ugh … we are so close.

Posted on 12/6/17 | 2:35 PM CET

Ronald Grünebaum

“Reste à liquider” is not money still to be committed to projects and initiatives. It is money still to be paid out for projects and initiatives agreed and contractually signed. On this point the UK never had a leg to stand on as it is a contracting party and can be sued.
Future spending under the current MFF is another story but the UK was wise not to challenge this. After all the MFF is based on a unanimous Council decision and it would be strange to say that the UK signed but didn’t mean it. Anyway, future spending will also have British beneficiaries although their share may be shrinking in the light of a disinterested British administration.
The Brits are not totally stupid even if Brexit implies otherwise. They know that trading with the EU on WTO terms will cost a lot more than this deal.

Posted on 12/6/17 | 2:37 PM CET

Ronald Grünebaum

@Georgis Pananopoulis

The term divorce is a British invention. This is not a divorce because you cannot be married to 27 partners.
It is leaving a club. And guess what? The club rules apply as interpreted by the club management. And because of that your membership fees of 44 years do not give you a right to take the clubhouse furniture with you. You may have noticed that the UK is no longer claiming a share in the (rather miserable) EU assets. The talk of taking a 15% share of the wine bottles of the EU institutions to London is no longer heard.

Posted on 12/6/17 | 2:42 PM CET

sgu66

Ronald

it’s true, the UK is being reasonable; unfortunately we now wait on others to do the same….

Posted on 12/6/17 | 2:50 PM CET

Alan the 2nd

This leak suggest a more or less fiar and balanced outcome for phase 1.

Clearly, the UK has in reality blocked the ECJ from having any real bite.

Likewise, the EU has got the money it has craved but with the UK seemingly in a position to withdraw the funds if no transition or future deal is agreed.

All in all, it actually looks like the UK has the edge at this stage.

Posted on 12/6/17 | 2:58 PM CET

Alexandre

Looks like we are finally leaving the kindergarten phase (shouting, blaming each other, complaining, etc.) behind. Wish that was done at the very beginning.

Posted on 12/6/17 | 3:14 PM CET

Gerhard

Lady Snortgiggle: They don’t have to get me anywhere. It is just amazing how obvious developments are, and how helpless the British react, still trapped in their own alleged grandness and superiority.
Georgis: No, it is not. It is Europe, with 450 mio people against the tiny UK with 65 mio. It is about a giant economic power against a small country depending largely on its one and only flourishing sector, the finance industry.
It is about overestimating one’s own capabilities (on the side of the UK) according to which Brexit would be a cinch.
And it is about the unwillingness of a country to understand that the EU is not willing to play according to the rules preferred by the UK, let alone eager to please the British pro-Brexiters.
And, first and foremost, it is about the inability to understand that the real Brexit process is very different to what Brexit propagandists promised.
In short: It is anything but a 50/50 affair. If you wish to use such comparisons, it is 10 or 20 on the British side against 80 or 90 on the EU side.
And it seems that Theresa Mey, finally has understood. Yet she has wasted an awful lot of time by playing the Brexit-parrot (“Brexit means Brexit”)

Posted on 12/6/17 | 3:30 PM CET

YellowSubmarine

I have to say that I am rather surprised at the text revealed here. Money to be paid when it’s due and when others also have to pay their share, which could be never. Percentage of the EU budget, the U.K. has agreed to pay, is not in the draft document.

It does appear that EU is rather more fixated on a final deal and it’s importance to EU and this can only be advantageous when negotiating a close and special deal for UK.

Lets see what happens when May goes back to Brussels.

Posted on 12/6/17 | 3:49 PM CET

Thalia

Vishnou
It’s OUR cake!
We paid for it and we’re taking it home.
What a lot of us now want is to keep all of our money and have as little to do withy the EU as possible from here on in.
Whereas in the beginning, we thought we might be making a mistake in leaving now we know we’d be making a mistake in staying any longer than we absolutely have to.
The EU are a bunch of power mad, money stealing, shysters.

Posted on 12/6/17 | 4:11 PM CET

kermelen

“The U.K. and EU have agreed not to settle the debt in one lump sum payment.”

But YES indeed. The notorious “Brexit Bill” has always been nothing but a red cloth waved by the ultra Brexiter propagandists to excite the bull.

They were so close to a sensible financial agreement but the DUP flush it down their sewage gutters.

Posted on 12/6/17 | 4:13 PM CET

Pax

Gerhard

Let’s wait and see for how much longer you’ll be able to display this show of ‘unity’ once we finally leave the rest of the empire will realise they have no say in the neo 4th reich.

Posted on 12/6/17 | 4:37 PM CET

Chris

@Georgis Pananopoulis
“you can have your cake and eat it particularly when its your cake but of course not if the EU wants to eat it first”
No can’t no mater how hard you try! explain that one if you can?
“Have the cake” = access to the single market
“and eat it too” = The UK avoids contributions & blocks Freedom Of Movement
Well, I can only wish you good luck with that, just try it we all want to witness this miracle!!! 🙂

Posted on 12/6/17 | 4:42 PM CET

Antoine

Total victory for UK on the money

So far, the UK is going to save 8 to 10 bln € a year (a bit less initially sloping over 40 years while paying down past commitments… in other words in current money UK will save 400 bln € – 50 (the bill)= 350 bln € today’s money over the next 40 years).

What has been achieved by the UK so far is not to pay at all for poor and privileged EU members nor for the administration of the EU (Brussels, etc…). The EU has totally surrendered on what was not contractual.

The cost associated to making these 350 bln € (today’s money) is that the UK may lose some access to the single market, so the trade deal will be about limiting the loss which explains why Theresa /Davies are so keen to get as close a relationship as possible and may ultimately decide to stay in the single/customs union.

This would mean they would do financially much better than Maggie and her rebate.

This is a very clever strategy because it puts the EU into the position to have to refuse free trade if it wants to recover a bit of the money so UK will have big Business on its side for the trade deal negotiation and, moreover, will be able to divide and rule the 27 countries.

Posted on 12/6/17 | 5:41 PM CET

Antoine

So, in conclusion, UK well on the way to have cake and eat it if only DUP would behave. I am not worried about Boris as somebody will brief him on how good a deal this is.
Is this what happens when one party negotiates for its money while the other party represents 27 countries interests?

Posted on 12/6/17 | 5:46 PM CET

Andy

This is obvious, the UK was never fir example going to make pension payments upfront – not least as we have no legal obligation post exit to pay anything

Loan guarantees are just that, guarantees in the event of non-payment by a third party.

Upfront payment was an attempt by the EU to deceive the European public that somehow Brexit was going to lead to a cash windfall.

Posted on 12/6/17 | 5:46 PM CET

tony

jodocus

Yes, it all sounds doable. I think the ECJ sunset clause needs to be spelt out better though. One year? 20 years? The lifetime of the people from the EU who have come here?

It is not acceptable to have a court in another country ruling on its citizens living in a third country, but having ‘regards’ for might be enough of a weasel word.

All in all, pretty reasonable. As the British say much more often than ‘having your cake and eating it’ is the phrase ‘half a cake is better than none’. That leaves the other half for the other person

Posted on 12/6/17 | 6:10 PM CET

xyc

Georgis Pananopoulis – And Vishnou and Gerhard, when will the EU understand that not everything can be in the EU’s favour?

Why not? The UK has decided to shoot itself in the foot and is somehow expecting others to share the pain? Not so, your foot, your bullet, but we are not mopping up, you can do that yourself too.

Posted on 12/6/17 | 6:15 PM CET

Della

@xyc
When you’ve finished shooting yourself in the foot post brexit to prove a point I wonder if you’ll be so dismissive … or whine like a biatch that it was all our fault?

Posted on 12/6/17 | 9:28 PM CET

Ted

As a leave voter who would have preferred a hard Brexit, I think this is a fair outcome of a negotiation between two parties. I don’t understand why people like Vishnou and Gerhard are still moaning and still trying to slag off the Brits. Everyone compromised, everyone got a little bit of what they wanted. That’s what happens in the real world. Just because the EU didn’t get to inflict as much damage on the UK in revenge for leaving you’re still not happy.

Posted on 12/7/17 | 10:53 AM CET

Priscilla du Bleu

@sgu66
“it’s true, the UK is being reasonable; unfortunately we now wait on others to do the same….”

Don’t worry. Arlene will return your calls if and when she finds the time ….

Posted on 12/7/17 | 11:10 AM CET

Andreas

I don´t think there will be an agreement in time. The only solution would be remaining in the Common Market and it seems impossible for the Government to sell that point now. Hard Brexit then, financial settlement via international courts.

Posted on 12/7/17 | 11:36 AM CET

Roland

Yes the Brits can be trusted to keep and pay for their financial obligations no matter what government they elect or how bad their economy tanks. The British economy is one of the worst in Europe it’s better to demand hard assets to back up their promises to pay their outstanding liabilities.

Posted on 12/7/17 | 1:14 PM CET

cinceur

Will the EU continue paying for projects that have been agreed to in the UK? Serious question.

Posted on 12/7/17 | 3:41 PM CET

Roland

Yes, I did just say the UK economy is one of the worst in Europe. Probably, I dunno….I read it scratched into the dirt on the back of a van.

Posted on 12/7/17 | 3:46 PM CET

Alex T

@Roland

The dirty van was, presumably, from somewhere like France or Belgium?

Posted on 12/7/17 | 4:54 PM CET

Apocalyptic Chemist

Vishnou constantly slags off the UK because he wanted to live here , unfortunately he ended up in some cultural dead zone with a racist undercurrent, bless him.

I have read the article and then went on to read the comments, it seems to me that the UK
is well in charge of the leaving debate, but the comments on here are mostly negative mostly wrong and very vindictive, shame on you all!